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Among the many types of unit trusts available—including equity trusts and trusts holding government bonds, insured and uninsured corporate bonds—the trusts that offer the greatest tax incentives are offered by tax-exempt trusts. Tax-exempt trusts consist of portfolios of municipal bonds that are generally exempt from federal income tax. The holding can be made up of either investment-grade or AAA-insured, and are issued in series of 5-, 10-, 15-, or 25- year average maturities. Certain municipal bonds may be subject to the Alternative Minimum Tax (AMT). Additionally, state-specific issues, which contain municipal bonds that are double- or triple-exempt, are exempt from federal, state, and local taxation for residents of the issuing state. In addition to tax-exempt trusts, there are a wide variety of taxable trusts, including those holding portfolios of corporate bonds, GNMAs, Freddie Macs, Treasury bonds, or other U.S. agency securities. |